The tax man is coming for posh cars, big boats and personal aircraft, imposing a “luxury tax” on high-end items in a move by Ottawa to generate more revenue.
But Diamond Aircraft in London, maker of small planes, fears the cash grab will cool Canadian sales of its single- and twin-engine aircraft that can range in price up to US$1.6 million.
Though most sales of its London-made products are in the US and won’t be hurt, the tax on high-end items will chill the Canadian market, said Trevor Mustard, sales manager at Diamond on Crumlin Road near London International Airport.
“This is not good for many businesses, we will feel the effect,” he said.
“An additional 10 per cent may be the straw that breaks the camel’s back. It won’t help. We will support any lobby group working to abolish this tax. There are better ways to collect.”
Still, Diamond’s order board is full for the next three years as international sales are keeping its more than 400 workers busy, Mustard added.
“It is strangely ironic that when the pandemic hit, our biggest concern was sales dropping off. We planned a production rollback. It was the opposite — sales of private planes went through the roof as people were not able to travel commercially,” he said. “We had banner sales.”
In fact Diamond hopes to add another 50 workers by year end.
But the tax, which began on Sept. 1, will be felt there and in other sectors. It will apply to cars and personal aircraft that sell for more than $100,000 and boats for more than $250,000. The one-time sales tax will be either 20 per cent of the value of the vehicle above $100,000, or 10 per cent of the total value, whatever is lower.
At Porsche London, there are a lot of cars for sale that top $100,000, and general manager Steve Rempel agrees the federal tax may put the brakes on what has been a good 2022 sales year.
“It will impact us for sure. It is a deterrent for some who have been thinking of buying a car. It will affect us,” he said.
The Wharncliffe Road dealership will sell more than 400 cars in 2022, as the dealership is the only one west of Oakville, Rempel said.
“We have been telling our clients for the last year that this tax is looming, we have done our best to keep people informed,” he said.
Rubbing salt in the wound, the luxury tax is charged after the sales tax, meaning it is added to the price of the vehicle after the 13 per cent GST is added.
“They don’t like that it is a tax on a tax,” Rempel said of customers.
At Maple City Marine in Chatham, the tax will hurt as they are one of the few boat retailers in the area that specialize in big and expensive watercraft.
“We are very concerned about it. If someone making that kind of purchase has to pay 10 per cent more it will deter sales,” general manager Rob Rule said.
“It’s awful. It is counter-productive.”
Maple City has had a strong 2022 sales season as many people took up boating in the pandemic, but Rule believes sales will slow in 2023.
“We will be down as a result of this,” he said.
He also questions why recreation vehicle sales are not targeted with the tax, suspecting it is because there is an RV manufacturing sector that would be affected.
“The fact they are not doing anything with RVs is unbelievable. Why not make it for everything in recreation? It is an unfair tax.”
As for Diamond, this year it will sell about 20 DA62 planes, its twin-engine seven-seater that can retail for about US$1.6 million, as well as about 100 DA40s, single-engine four-seater planes that sell for about US$500,000 .
Diamond has orders in 2023 for 24 DA62s and 120 DA40s. It also makes a small single-engine DA20 plane and sold about 24 this year, with sales growing to about 40 next year.
“If I had 1,000 planes, I could sell them,” Mustard said.